Birkbeck University - Business Behaviors

Capital

The factories, machinery, and equipment owned by a business and used in production. Financial assets that are available for use.

Public Limited Company

When shares are sold on the stock exchange and are available to the general public. 

Private Limited Company

When shares are not sold on the stock exchange and are available to family and/or friends 

Sole Trader

A Sole Trader is a common business structure where an individual who owns and run their business by themselves.

Partnership

A partnership is a business owned by 2 or more people who share the responsibilities of running it.  

Franchise

A business arrangement where a company grants permission to an individual the right to use its brand name, trademarks, and operational systems for an initial fee and royalties.

Entrepreneur

An individual who plans, organizes, and manages a business, and takes on financial risks doing so.

Characteristics of an Entrepreneur

Taking substantial risk, having vision for a business, failure can result in personal costs

Unlimited Liability

Owners are personally responsible for all debts and financial obligations, with no limit on the amount they may have to pay

Limited Liability

A legal structure protecting business owners' personal assets (homes, savings) from being used to pay company debts if the business fails

Sole Traders Advantages

Few legal formalities, profit taking, quicker decision-making, own boss

Sole Traders Disadvantages

Unlimited liability, limited sources of finance, high risks

Partnership Advantages

Financial strength, financial privacy, cost-effective

Partnerships Disadvantages

Unlimited liability, prolonged decision-making, a lack of continuity

Limited Liability Companies Advantages

Limited Liability, Tax benefits, Raising fiance

Limited Liability Companies Disadvantages

Communication problems, loss of control, compliance costs

Economies of Scale

When average costs of production decrease as the organization increases the size of its operations.

Diseconomies of Scale

When an organization becomes too large, it causes productive inefficiencies that result in an increase in the average cost of production.

Mission Statements

A simple declaration of the underlying of an organization’s purpose of existence focusing on medium to long-term goals

autocratic leadership

a management approach where a single leader holds all decision-making power, exercises complete control, and expects unquestioning obedience from team members

Democratic Leadership

A management style where leaders involve team members in the decision-making process.

Laissez - faire

a hands-off management style where leaders provide minimal direction, trust their team members, and delegate decision-making freedom to employees

Transformational leadership

leadership style where managers inspire and motivate team members to exceed their perceived capabilities

Transactional Leadership

a management and leadership style that treats the relationship between a leader and a follower as a direct transaction or exchange

Charismatic style

an interpersonal management style where a leader uses personal charm, communication skills, and a compelling vision to inspire, motivate, and influence followers

Paternalistic Leadership

a management style where a leader acts like a "father figure" combining strong authority and discipline with genuine care and concern for employee well-being

autocratic leadership advantages

• Decisions are made quickly.

• Employees have clear instructions about what to do.

• Useful in emergencies when quick decisions are needed.

Autocratic leadership disadvantages

• Employees may feel ignored or undervalued.

• Can reduce employee motivation.

• Less creativity because employees cannot share ideas.

Democratic leadership advantages

• Employees feel valued and respected.

• Can increase motivation and job satisfaction.

• More ideas are shared, which can improve decision-making

Democratic leadership disadvantages

• Decisions can take longer because everyone is involved.

• Disagreements between employees can occur.

• Not suitable for emergencies.

Paternalistic leadership advantages

• Employees feel cared for and supported.

• Can create loyalty towards the business.

• Improves employee wellbeing and job satisfaction.

Paternalistic leadership Disadvantages

• Employees have limited involvement in decisions.

• Employees may become too dependent on the leader.

• The leader might make decisions based on what they think is best rather than what employees actually want.

Transformational leadership advantages

• Encourages innovation and creativity.

• Can increase employee motivation.

• Helps the business achieve long-term goals.

Transformational Leadership disadvantages

• Can create pressure on employees to achieve ambitious goals.

• Changes can be difficult for employees to adapt to.

• The leader's vision might not always be realistic.

Transactional leadership advantages

• Employees have clear targets and expectations.

• Rewards can motivate employees to work harder.

• Performance is easier to measure.

transactional leadership disadvantages

• Employees may only work hard to receive rewards.

• Less focus on creativity and innovation.

• Can create a stressful working environment.

Charismatic leadership advantages

• Can strongly motivate and inspire employees.

• Creates enthusiasm and excitement.

• Can build a strong company culture.

Charismatic leadership disadvantages

• Employees may become too dependent on the leader.

• The business may struggle if the leader leaves.

• The leader's confidence may cause them to ignore other opinions.

Laissez-faire leadership advantages

• Employees have freedom to make their own decisions.

• Encourages creativity and innovation.

• Can increase employee motivation and independence.

Laissez-faire leadership disadvantages

• Employees may lack direction and guidance.

• Can lead to poor decision-making if employees lack experience.

• Work may become disorganised without supervision.

Characteristics of motivated employees

Positive, Responsible, Team player, Hardworking

Benefits of having motivated employees

Better productivity, Lower levels of staff turnover, innovation